Head-To-Head Survey: Farmers & Merchants Bancorp (OTCMKTS:FMCB) & Pinnacle Financial Partners (NASDAQ:PNFP)

Pinnacle Financial Partners (NASDAQ:PNFP) and Farmers & Merchants Bancorp (OTCMKTS:FMCB) are both finance companies, but which is the superior investment? We will compare the two businesses based on the strength of their analyst recommendations, dividends, profitability, valuation, earnings, risk and institutional ownership.

Profitability

This table compares Pinnacle Financial Partners and Farmers & Merchants Bancorp’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Pinnacle Financial Partners	15.48%	9.04%	1.08%
Farmers & Merchants Bancorp	30.22%	15.22%	1.62%

Risk & Volatility

Pinnacle Financial Partners has a beta of 1, suggesting that its share price has a similar volatility profile to the S&P 500.Comparatively, Farmers & Merchants Bancorp has a beta of 0.26, suggesting that its share price is 74% less volatile than the S&P 500.

Insider and Institutional Ownership

87.4% of Pinnacle Financial Partners shares are held by institutional investors. Comparatively, 5.6% of Farmers & Merchants Bancorp shares are held by institutional investors. 1.5% of Pinnacle Financial Partners shares are held by insiders. Comparatively, 8.5% of Farmers & Merchants Bancorp shares are held by insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company will outperform the market over the long term.

Analyst Recommendations

This is a breakdown of current ratings and target prices for Pinnacle Financial Partners and Farmers & Merchants Bancorp, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Pinnacle Financial Partners	0	4	6	0	2.60
Farmers & Merchants Bancorp	0	0	0	0	0.00

Pinnacle Financial Partners currently has a consensus target price of $119.50, indicating a potential upside of 13.12%. Given Pinnacle Financial Partners’ stronger consensus rating and higher possible upside, research analysts clearly believe Pinnacle Financial Partners is more favorable than Farmers & Merchants Bancorp.

Valuation and Earnings

This table compares Pinnacle Financial Partners and Farmers & Merchants Bancorp”s top-line revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Pinnacle Financial Partners	$1.59 billion	5.15	$475.06 million	$6.18	17.09
Farmers & Merchants Bancorp	$292.68 million	2.38	$88.46 million	$123.32	8.11

Pinnacle Financial Partners has higher revenue and earnings than Farmers & Merchants Bancorp. Farmers & Merchants Bancorp is trading at a lower price-to-earnings ratio than Pinnacle Financial Partners, indicating that it is currently the more affordable of the two stocks.

Dividends

Pinnacle Financial Partners pays an annual dividend of $0.96 per share and has a dividend yield of 0.9%. Farmers & Merchants Bancorp pays an annual dividend of $18.60 per share and has a dividend yield of 1.9%. Pinnacle Financial Partners pays out 15.5% of its earnings in the form of a dividend. Farmers & Merchants Bancorp pays out 15.1% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Pinnacle Financial Partners has raised its dividend for 1 consecutive years. Farmers & Merchants Bancorp is clearly the better dividend stock, given its higher yield and lower payout ratio.

Summary

Pinnacle Financial Partners beats Farmers & Merchants Bancorp on 10 of the 17 factors compared between the two stocks.

About Pinnacle Financial Partners

Pinnacle Financial Partners, Inc., together with its subsidiaries, operates as the bank holding company for Pinnacle Bank that provides various banking products and services to individuals, businesses, and professional entities in the United States. The company accepts various deposits, including savings, noninterest-bearing and interest-bearing checking, money market, and certificate of deposit accounts; and provides treasury management services, which includes online wire origination, enhanced ACH origination services, positive pay, zero balance and sweep accounts, automated bill pay services, electronic receivables processing, lockbox processing, and merchant card acceptance services. It offers equipment and working capital loans; commercial real estate loans comprising investment properties and business loans; secured and unsecured loans, such as installment and term, lines of credit, and residential first mortgage, as well as home equity loans and home equity lines of credit; and credit cards for consumers and businesses. The company also provides investment products; brokerage and investment advisory programs; and fiduciary and investment services, such as personal trust, investment management, estate administration, endowments, foundations, individual retirement accounts, escrow services, and custody. In addition, it offers insurance agency services primarily in the property and casualty area; merger and acquisition advisory services; and private debt, equity and mezzanine, and other middle-market advisory services. Further, the company provides telephone and online banking, mobile banking, debit and credit cards, direct deposit and remote deposit capture, mobile deposit option, automated teller machine, and cash management services. Pinnacle Financial Partners, Inc. was incorporated in 2000 and is headquartered in Nashville, Tennessee.

About Farmers & Merchants Bancorp

Farmers & Merchants Bancorp operates as the bank holding company for Farmers & Merchants Bank of Central California that provides various banking services to businesses and individuals. The company accepts various deposit products, including checking, savings, money market, time certificates of deposit, and individual retirement accounts. It also offers range of lending products comprising commercial and residential real estate, real estate construction, agribusiness, and consumer loans, as well as equipment leases and credit card services; commercial products, including term loans, lines of credit and other working capital financing, and letters of credit; and financing products, such as automobile financing, home improvement, and home equity lines of credit. In addition, the company provides various specialized services consisting of credit card programs for merchants, lockbox and other collection services, account reconciliation, investment sweep, online account access, and electronic funds transfers through domestic and international wire and automated clearinghouse; online banking services; and investment products, such as mutual funds and annuities. The company was founded in 1916 and is headquartered in Lodi, California.